Exam 16: Cost Allocation: Joint Products and Byproducts

Woody City Manufacturing mills lumber for companies who manufacture furniture.The main product is finished lumber with a byproduct of wood shavings.The byproduct is sold to plywood manufacturers.For July,the manufacturing process incurred $412,000 in total costs.Eighty thousand board feet of lumber were produced and sold along with 7,000 pounds of shavings.The finished lumber sold for $6.00 per board foot and the shavings sold for $0.60 a pound.There were no beginning or ending inventories. Required: Prepare an income statement showing the byproduct (1)as a cost reduction during production,and (2)as a revenue item when sold.

Discuss in brief how easy it is for companies to classify products as main products,joint products,and byproducts.

Joint processing costs are relevant in deciding whether to process the product further.

One of the reasons to allocate joint costs to individual products is to have costs reimbursed under a federal cost=plus contract.

In joint costing,the sales value at split-off method allocates joint costs entirely to joint products sold during the accounting period on the basis of the relative total sales value at the split-off point.

The Brital Company processes unprocessed milk to produce two products,Butter Cream and Condensed Milk.The following information was collected for the month of June: The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 33,000 gallons of saleable product was $55,000. The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.Which of the following statements is true of Brital?

The net realizable value (NRV)method method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.

New York Liberty Corporation makes miniature statues of the Empire State Building from cast iron.Sales total 50,000 units a year.The statues are finished either rough or polished,with an average demand of 60% rough and 40% polished.Iron ingots,the direct material,costs $5 per pound.Processing costs are $300 to convert 30 pounds into 60 statues.Rough statues are sold for $17 each,and polished statues can be sold for $19 or engraved for an additional cost of $5.Polished statues can then be sold for $32. Required: Determine whether New York Liberty Company should sell the engraved statutes.Why?

Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point where two products (paper and pencil casings)emerge from the process.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of October: The cost of purchasing 270 trees and processing them up to the split-off point to yield 180,000 sheets of paper and 180,000 pencil casings is $15,000. Bismite's accounting department reported no beginning inventory. What are the paper's and the pencil's approximate weighted cost proportions using the sales value at Split-off method,respectively?

The Green Company processes unprocessed goat milk up to the split-off point where two products,condensed goat milk and skim goat milk result.The following information was collected for the month of October: The costs of purchasing the of unprocessed goat milk and processing it up to the split-off point to yield a total of 104,000 gallons of saleable product was $186,480.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 45,000 gallons (the remainder is shrinkage)of a medicinal milk product,Xyla,for an additional processing cost of $4 per usable gallon.Xyla can be sold for $19 per gallon. Skim goat milk can be processed further to yield 57,200 gallons of skim goat ice cream,for an additional processing cost per usable gallon of $4.The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. Using estimated net realizable value,what amount of the joint costs would be allocated Xyla and the skim goat ice cream? (Round intermediary percentage calculations to the nearest hundredth. )

Which of the following best describes how the constant gross-margin percentage NRV method allocates joint costs?

How does the net realizable value method allocate joint costs?

Outputs with a negative sales value because of disposal costs have which of the following impact on costs?

The Alfarm Corporation processes raw milk up to the split-off point where two products,cream and liquid skim,are produced and sold.There was no beginning inventory.The following material was collected for the month of February: The cost of purchasing 820,000 gallons of direct materials and processing it up to the split-off point to yield a total of 797,500 gallons of good product was $2,350,000.What are the physical-volume proportions to allocate joint costs for cream and liquid skim,respectively?

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at split-off and estimated net realizable value)since no account is taken of profits earned before or after the split-off point when allocating joint costs.

Joint costs are the costs of a production process that yields multiple products simultaneously.

The sales value at split-off method presupposes the exact number of subsequent steps undertaken for further processing.

The drawback of the constant gross-margin percentage NRV method in joint costing is that it ________.

Which of the methods of allocating joint costs usually is considered the simplest to implement?

If the value of a byproduct drops significantly,it could also be viewed as a joint product.